Energy Pathways

at the centre of the storage storm

Good Morning Team.

Amid the market chaos that is Trump’s tariffs, the world continues to turn - and the small cap opportunities remain on offer for those skittish on the strength of the large caps.

We’re adding in something a little different today - Energy Pathways (LON: EPP) - with a view to gain some diversification.

As ever, you might only want to invest in small caps from a diversified position of financial resilience. Small cap companies are typically higher risk - in exchange for offering greater rewards.

Later this week, I’ll be covering the links between the artificial intelligence arms race and the junior resource sector, so stay tuned.

But for now.

Let’s dive in.

Energy Pathways: the investment case in 20 points

If you want to know what a company cares about, visit its website. If they haven’t updated it in years, then maybe look to invest elsewhere - but EPP makes clear on the homepage:

‘Energy Pathways is developing low-emissions energy solutions to satisfy the growing demand for home-grown clean energy for Britain as it transitions to Net Zero.

We're proud to play our part in delivering energy security for the UK, developing clean energy solutions that lower its carbon footprint. We're developing the MESH energy infrastructure project that will provide the UK with a secure and flexible supply of low-carbon, low-cost energy.’

But what does this actually mean? Having spent the past 48 hours down the rabbit hole of Trumpian politics, I decided to make this first article on #EPP something easy to understand.

Here’s your 20 points:

1. Pioneering Decarbonised Energy Solutions

Energy Pathways is developing a fully electrified subsea gas development concept for the Marram field based in the Irish Sea.

Unlike traditional developments, this will be powered entirely by renewable energy, eliminating carbon emissions. The Marram field will be the first gas development in the UKCS to achieve this level of decarbonisation, setting a benchmark for future energy projects.

Ya know the Labour lot lover their Net Zero pet projects.

2. Strong Government Alignment & Regulatory Support

Yes, the UK government has shifted its energy policy focus firmly toward domestic energy security and net-zero carbon targets.

Energy Pathways’ Marram Energy Storage Hub (MESH) aligns perfectly with these goals, because it provides both a secure domestic energy source and large-scale storage capabilities. This makes #EPP well-positioned to secure government approvals, support, and possibly strategic funding - just look at Cornwall for how much is up for grabs.

3. Material Progress on FEED Workstreams

Significant progress has already been made on Front-End Engineering Design (FEED) workstreams. Key developments include:

• Infrastructure host discussions

• Regulatory and permitting engagements

• Engineering studies focused on subsea electrification and storage integration

These advancements reduce development risk and accelerate the timeline toward the near-term final investment decision (FID).

4. Strategic Industry Partnerships

Energy Pathways has signed a Memorandum of Understanding (MoU) with MCS Subsea Solutions and Mermaid Subsea Services, to support subsea FEED engineering, procurement, project support, and offshore construction.

These partnerships ensure access to cutting-edge subsea technology and expertise - and EPP would not be able to execute without them.

5. Major Investment in Energy Storage Infrastructure

Energy Pathways’ MESH will integrate:

• Untapped gas resources from Marram

• Offshore wind power for electrification

• High-quality geological reservoirs for gas and hydrogen storage

Making it a diversified investment which attracts multiple revenue streams.

6. Government Recognition & Hydrogen Storage Participation

Energy Pathways was invited by the UK Department for Energy Security and Net Zero to participate in the Hydrogen Storage Business Model (HSBM) Design Group. This:

• Validates Energy Pathways’ expertise in energy storage

• Positions the company at the forefront of policy discussions

• Increases the likelihood of future government support & funding

7. High-Quality Geological Storage Assets

Beyond Marram, Energy Pathways has also identified additional geological storage reservoirs with similar characteristics, including the Knox & Lowry fields.

These sites offer the potential to expand energy storage capacity significantly, supporting large-scale hydrogen and gas storage - and making the entire asset base more attractive to financiers.

8. Engagement with Tier-1 Energy Leaders

Energy Pathways is forming a consortium with:

• A major integrated oil & gas company

• A FTSE 250 engineering consultancy

• An industrial automation leader

These collaborations provide industry expertise, funding and financing opportunities - and cutting-edge technology for safe and efficient energy storage.

9. Hydrogen Production & Storage Potential

Energy Pathways is evaluating the integration of hydrogen production within MESH by leveraging excess offshore wind power.

This could triple the project’s energy storage capacity, making it one of the largest hydrogen storage facilities in the UK. Better than this though, it future proofs the project against innovation.

10. £5.1 Million Green Loan Facility Secured

Energy Pathways has secured a £5.1 million green loan facility from Global Green Asset Financing Limited (GGAF).

This funding will cover MESH’s FEED phase, allowing the company to advance its project development without dilution of existing shareholders. Getting capital on reasonable terms is not easy in this market, so this should give you a clue on the likelihood of success.

11. Minimal Shareholder Dilution with Flexible Debt Financing

The Green Loan Facility ensures Energy Pathways can progress without issuing new shares, maintaining equity value for early investors.

This approach optimises the company’s capital structure while securing growth financing. Of course, you can never guarantee dilution won’t happen (especially as part of a debt, offtake and equity package if needed), but it was lovely to see EPP slap the doubters in the face.

12. Strategic Location for Large-Scale Hydrogen Storage

The MESH facility, located off the Lancashire coast, has an initial storage capacity equivalent to the Rough storage facility (~15TWh). Future expansion plans could triple this capacity, making MESH a cornerstone of the UK’s energy storage infrastructure.

13. Leading Role in the UK's Hydrogen Economy

The UK government aims for 10GW of low-carbon hydrogen production by 2030. Large-scale hydrogen storage is crucial to achieving this goal. It’s not going to happen without substantially more.

Energy Pathways is well-positioned to become a key player in this evolving market through MESH - though government priorities shift, and it remains early days.

14. Government Support for Infrastructure Development

The UK government has pledged billions toward energy infrastructure and decarbonisation projects. Given its alignment with national energy goals, Energy Pathways is well-placed to secure subsidies, and investment support that goes beyond the typical grant funding.

For example, there are plenty of ways the government could support sans explicit grant funding, including guaranteeing a portion of any commercial loan - or perhaps underwriting loans at sub-market rates.

15. Proven Interest from Institutional Investors

The Green Loan demonstrates strong institutional confidence in Energy Pathways' business model.

Investor interest in low-carbon energy storage solutions is growing, making Energy Pathways an attractive opportunity for future funding rounds. You don’t get institutions on board with smoke and mirrors.

16. Ability to Repurpose Existing Infrastructure

Energy Pathways is exploring ways to repurpose existing offshore infrastructure to:

• Reduce decommissioning costs

• Enable faster deployment of energy storage solutions

• Minimise its environmental impact

This approach enhances project economics and supports the circular economy. The circular economy is all the rage these days.

17. Accelerating Path to Final Investment Decision (FID)

EnergyPathways is targeting:

• Final Investment Decision (FID) by end of 2025

This reduces investment uncertainty and ensures a clear pathway to commercial operations - or in layman’s terms, the CEO isn’t planning to fuck about for years.

18. Operational Milestones & Regulatory Approvals

Energy Pathways has obtained North Sea Transition Authority (NSTA) approval for its operatorship of Block 110/4a, which includes MESH.

Regulatory approvals for field development and environmental permitting are progressing in line with development plans - and again, you don’t get approval without ticking all the right boxes.

19. Strong Execution Capability with Tier-One Engineering Support

EnergyPathways has appointed Wood Group UK as the lead engineering partner. Wood is one of the world’s top engineering firms and plans to support development. Their presence massively boosts project delivery certainty.

20. Potential for Long-Term Infrastructure Returns

MESH is designed for a 20+ year operational life, generating:

• Stable, long-term cash flows

• Attractive project IRR

• Significant strategic value in the UK’s energy transition

But if 20 reasons is not enough, then….

Let’s consider what CEO Ben Clube has been saying over the past few months:

• ‘MESH is precisely the kind of project being sought under the new administration.’

• ‘To be selected for inclusion in the GGAF investment portfolio validates Energy Pathways as a low emission energy transition company.’

• ‘Energy Pathways will have an opportunity to contribute to the shape of the final commercial and regulatory design of the Hydrogen Storage Business Model that will be used in the First Hydrogen Storage Allocation Round to be launched in 2025.’

• ‘We are delighted to announce the NSTA's approval for the Licence Operatorship for Marram Block 110/4a which is an endorsement by Government authorities of our operating capabilities and is a necessary milestone to keep us on track towards our plans to achieve FID on MESH later this year.’

Sounds good.

But the million-dollar question (and yes, very speculative at this stage) is this:

Can MESH work with ROUGH, or even replace it?

MESH does (based on publicly available information) have the potential to replace Rough as the UK’s primary energy storage facility, but only under the right conditions.

For perspective, Rough currently stores around 30TWh of gas, following recent upgrades by Centrica. MESH only has an initial storage capacity of 15TWh, but with planned expansions, this could reach 45 TWh, surpassing Rough’s capacity.

Therefore, in terms of raw energy storage potential, MESH could serve as a viable replacement. However, the timeline for expansion is crucial — Rough is operational now, but MESH’s full build-out is expected post-2027.

One of the key advantages of MESH over Rough is its fuel flexibility. Rough is strictly a natural gas storage facility, whereas MESH is designed to accommodate both natural gas and hydrogen, making it more aligned with the UK’s long-term decarbonisation strategy.

As the energy transition accelerates, hydrogen could play a growing role in the UK’s energy mix (pinch of salt as always, though).

While Rough could, in theory, be retrofitted for hydrogen storage, doing so would require significant investment and regulatory approvals, making it a less attractive option compared to MESH’s built-in hydrogen capability.

MESH also offers a more integrated energy system. Unlike Rough, which is purely a gas storage site, MESH is linked to offshore wind power and subsea electrification- so it can function as a renewable energy buffer. This means it can store excess energy from wind generation, helping to balance grid fluctuations and provide stability during periods of low wind output.

This is a significant advantage over Rough, which operates independently of the renewable sector and relies on traditional fossil fuel infrastructure.

Traditional infrastructure that the Labour party - with years left in power - seems utterly determined to smash. (See North Sea tax rates and recent court judgments).

This is important because regulatory support will play a major role in determining whether MESH can fully replace Rough. And yes, the UK government is clearly prioritising energy security and net-zero commitments, which puts MESH in a favourable position.

However, Rough has strong political backing due to its immediate ability to store gas during crises - and we seem to live in a world where constant firefighting makes backing nearer-term solutions easier. Consider that we decided not to bother with expanding nuclear in the early 2000s because it would take 20 years to see the benefit.

So while MESH is the better long-term solution, Rough remains a short-term necessity until MESH is fully operational and capable of handling the UK’s seasonal energy storage demands.

Geographically, MESH is well-positioned (Lancashire coast - great cheese btw) to serve major industrial hubs. It’s close to the HyNet hydrogen cluster, Merseyside - and Manchester, where demand for hydrogen and energy storage is expected to grow.

Rough, located off the Yorkshire coast, inarguably does not have the same level of strategic proximity to emerging hydrogen markets. Additionally, MESH can leverage existing pipelines and grid connections in the region, reducing the cost of integration compared to modifying Rough for future energy storage needs.

However, despite its advantages, MESH is unlikely to be fully operational until after 2027 so will likely be working in addition to ROUGH until then…

Unless Centrica decides to buy a promising asset :)

Ultimately, the question of whether MESH can replace Rough in the long term depends on timing, policy support, and hydrogen market growth.

And yes - luck.

In the short term (say 2024-2027), Rough remains essential for gas security, with MESH in a supporting role. In the medium term (from 2027 onwards), MESH could partially replace Rough, offering a cleaner and more flexible storage option.

Beyond 2035, as hydrogen adoption expands, MESH could fully replace Rough, making it the UK’s primary energy storage hub. Of course, given how low energy storage affected the UK in the immediate aftermath of Russia’s invasion of Ukraine, there’s probably space for more than one large hub.

But a lot needs to go right for this to happen - so one step at a time.

The bottom line

Energy Pathways remains a minnow, and the cash requirement to build out MESH is not insignificant. Costs also tend to rise when you start building any infrastructure asset.

But given the size of the prize, the juice is worth the squeeze.

The UK has virtually no energy storage, and energy security is now at the top of the political agenda - both in terms of national security, but also in ideology.

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